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Marc Andreessen On Why Bitcoin Matters (And A Critique)
New submitter Ramtek writes "Marc Andreessen writes an interesting editorial on how he how he believes Bitcoin is the first practical solution to the Byzantine Generals Problem and why that is important. He also addresses many of arguments against its future by its critics such as its current limited use by ordinary consumers, its current volatility, its potential lack of acceptance by merchants, and many other issues. While politically agnostic the piece is squarely in support of Bitcoin but presents a more mature perspective than many current Bitcoin editorials."
eggboard wrote in with a rebuttal: "Marc Andreessen wrote an essay in the New York Times in which he tried to make the case for Bitcoin going mainstream for payments, if not as a currency. After comparing Bitcoin to the rise of personal computers and the Internet, he tries to explain how it eliminates fraud and will solve global money transfers and the plight of the unbanked. I wrote a critique of these and other points in his essay."
Bitcoin is the first practical solution to the Byzantine Generals Problem
Why is this the first we're hearing about this? These Byzantine Generals must be stopped at all costs! Inform the TSA! Harvest the metadata! And will someone please get me a burger!
systemd is Roko's Basilisk.
I'd say that that works in favour. As bitcoin get more valuable / scarce the tendency to protect them increases. So as more of them get lost the rate of them getting lost will decrease. Note that "gold" also has a finite amount available that gets progressively harder/more expensive to mine.
I would say "The Cat" is right.
The more persons that uses Bitcoin the more coin's will be lost.
The time between finding new Bitcoins is getting longer and longer. And they do not replace the lost ones they are just generated.
So if Bitcoins becomes a every man/woman thing. Then the value of a single Bitcoin will raise to something insane before it will just die because the number of persons actually having coins will be to small to function as a currency.
I lost a $100 bill at the casino. Can you void that and issue me a new one please?
"Critics of Bitcoin point to limited usage by ordinary consumers and merchants, but that same criticism was leveled against PCs and the Internet at the same stage."
Sure, but "at this stage" people who owned PCs weren't mostly buying them to hoard them for their future value.
I would say "The Cat" is right.
No, the cat is wrong. He claimed there will be zero, merely because they are being lost. That is mathematically incorrect.
On a more practical note, as they are lost, they will slowly increase in value. However they are divisible. People will be losing small fractions of a coin rather than whole coins. The more spread out they get, the smaller fractions people will be losing.
SJW n. One who posts facts.
I just hope enough people keep this potential scam in perspective enough not to overextend themselves to the point that they're jumping out of windows when it collapses. I have to get to work and I don't need too many dead bodies in the street blocking traffic.
The cow says "Moo." The dog says "Woof." The Timothy says "Thanks, valued customer. We appreciate your input."
The "criticisms" leveled by OP are largely moot:
A) "Fees" are generally not charged... most transactions have essentially zero cost.
B) The criticism that development of the Internet was "open" but Bitcoin was not is also moot: Bitcoin is open-source, and anybody can examine the code for secrets or flaws.
There are other subtleties as well which I will not get into.
I'm still concerned with the verification time required to show that double spending hasn't happened. It's simple to double spend bitcoins, though within 20 minutes or so the blockchain will show which transaction went through. This means bitcoins can be used for online orders (as long as the seller is trusted because no chargebacks), but waiting around at the Target checkout for 20 minutes can't happen, at least with only direct bitcoin transfers. You could have a processor guarantee with more information to save time, but that's more like an already existing debit account and less like the bitcoin transfers people are excited about.
//TODO: signature
Bitcoin is pretty much the opposite of untraceable. For a bitcoin transaction to be valid it has to be reported in a giant public ledger where everyone agrees on it. If you send bitcoins to someone there is a permanent record of you doing so. Sure the ledger might not associate a wallet address with a particular person, it doesn't for example record 'John Q. sent Bill W.' 100 BTC, but it does record that wallet '1785' sent 100 btc to wallet '1863'. There are a variety of ways to link a particular wallet address to a physical person, especially if that person is attempting to cash out to any Fiat currency (either the transaction has to be done 'in person' or virtually every exchange that allows deposit or withdrawal of fiat currency requires some sort of identity verification, not to mention it's likely being withdrawn to a bank account, which also likely has a name associated with it). The long and short of it is, that if you want to transact business without a paper trail, cold hard, unmarked cash is still the best way to do it.
In a bit of shameless internet panhandling, I accept Litecoin Donations at Lbd2oH9QsthD1GfuUXPyka12YxvWJYnBVf
Losing coins are not a problem as they are infinitely divisible. Currently only to 8 decimal places, but that can be increased if needed. One bitcoin or even a fraction of a bitcoin is enough to run the whole world economy.
The problem with Bitcoin is once a Bitcoin is lost, it's gone forever and can never be replaced. There's no provision in the system to void a coin and then mine a new one.
Therefore if bitcoins are lost at a rate > 0 the probability there will be zero bitcoins is 100% over time.
Is that the problem?
I thought it was volatility. No, wait... it was a pyramid scheme. Or rather, because the US won't accept it for taxes. Or was it because it's deflationary? Heck, I just don't know any more.
Economists will demonstrate something by telling stories, let's demonstrate something by showing value.
1) BitCoin has very small per-transaction fees. There are a whopping-big number of credit card transactions each day, each with fees of about 5%. Bitcoin will eliminate most of these, for a whopping-big cost savings.
2) BitCoin increases the market to people who don't have a bank account. That essentially doubles the potential customer base.
3) BitCoin allows for micro-payments. This increases the number and type of sales possible.
4) BitCoin almost eliminates counter-party risk. No authority in the financial chain (PayPal, payment clearing center, credit card company, bank, US government) can affect the transfer. No one can be "banned" (like Wikileaks), no one can be threatened with bad credit.
Assign value to each of these points and total them up (there's some subjectivity), then compare that value with the negative utility from losing coins over time.
Which is worth more?
All the other potential problems are just that - potential problems, and appeals to these problems are merely guesswork and rhetoric.
BitCoin will bring enormous cost savings, and that's why people will use it.,
"Marc Andreessen’s venture capital firm, Andreessen Horowitz, has invested just under $50 million in Bitcoin-related start-ups."
i.e. Even if he doesn't believe a damn word he's saying - he's heavily invested enough to need to make it work.
Oh boy, it really will be an education for some.
Yes bitcoin is unstable, it is also a very new technology. Things should stabilize as the currency matures.
No regulation is not all about disadvantages. There are many advantages as well like not being subject to the whims of a transasction processor to hold your payments or deny your business. Bitcoin fills a need but is not meant to replace every other currency out there. Crime is crime my friend. If somebody picks your pocket who do you go cry to to get your money back. Bitcoin is cash and you should be careful who you do business with.
Bitcoins being a solution in search of a problem; I disagree, they are a solution to the many problems that plague the financial industry today. You don't see it as a problem that Visa and Mastercard take a 2% to 3% cut out of every transaction? That is billions of dollars being syphoned off of people and merchants every year just because there is no other convenient way to pay somebody besides cash. Ya, our banking system works well in first world countries but tell that to an immigrant who can't get a bank account and if forced to pay Western Union a big chunk of the remittance they are sending home to support families living in poverty. Bitcoin has the potential to divert billions to people who need it in poorer countries, to feed, clothe and shelter themselves.
Also tell that to Argentinians who are seeing their life savings being eroded at a rate of 30% a year. Bitcoin is a safe haven for all those people who don't have the connections to store other currencies offshore. Tell them there are no problems that need a bitcoin solution
Frankly your view on this is a first world view.
Anonymity: Bitcoin are pseudonymous. Anonymity is not the main goal of bitcoin. They are more anonymous then paypal, visa et al. but less so then cash. But if you want to deal with Paypal and their ridiculous fees be my guest. If you like having paypal be the judge, jury and executioner of your transactions, withholding your payments, freezing your account at any whim without explanation to you then that is your right I suppose.
Investments. Bitcoin is no doubt a high risk investment. What's the problem here, you can still buy bitcoin as you need for spending without holding large amounts. Junk bonds and penny stocks are also risky, but people still buy them. Many people invest in bitcoin because they believe in the long term potential, that is their choice, as it is yours to invest in some geek which is a noble thing to do.
Intrinsic value; People only value US dollars because other people value it. While dollars are backed by government, bitcoin is backed by math. You can't counterfeit it, you can't create more then 21 million of them by the year 2140. It is backed by a whole community of people that believe in it and the infrastructure being built right now around it. If you assign it 0 value then that is your choice, many people feel otherwise because they see bitcoin as uncorruptible by central banks who infuse billions of dollars monthly into the econonmy out of thin air.
I encourage you to read the whitepaper on bitcoin written by Satoshi himself (google it) , get to understand stuff before you bash it. If you think bitcoin the currency is all the rage, get to know the protocol. Wait until the protocol is used for loans and contracts. It has the potential to replace entire industries in banking and law with a 100 lines of python code.
We don't need another currency.
The target after which bitcoin system is going, aren't the other *currencies*.
The point is not to replace USD or EUR with BTC.
Bitcoin is going after system which transfer money. They point of the bitcoin system is to displace/replace PayPal or Western Union.
The closest thing which ressembles to what bitcoin brings to the table are SEPA payment.
Bitcoin (like SEPA) brings :
- Direct end-to-end payment without any intermediate (as long as both banks support SEPA you can send money accors. As long as both end-points support bitcoin protocol, you can send BTC accross). No need to get anyone else involved (you don't need MasterCard to come in do some shit).
- Complete freedom of choice regarding what you use (The choice of the SEPA-compatible bank that the merchant use, doesn't force me to use a specific bank. The merchant might be using some banks in Germany, and I might be at Raiffeisen in Switzerland. Similarily the bitcoin merchant can be using bitpay for seamless BTC-to-EUR payment processing and conversion, whereas I might be sending my coins from my localbitcoin account). (Compare the situation when paying USD online: both end of the transaction are required to by client at PayPal, for exemple). It goes even further in that SEPA can't directly send EUR from the wallet in your pocket, you need to have an account in a bank. Whereas you can send bitcoins from your own copy of bitcoin-qt client, from an offline armory, etc.
- High speed (SEPA payment take a couple of days, a week in worst case scenario) (bitcoin are even faster payments take minutes, a couple of hours in worst case)
- Low fee (SEPA payment between two compliant bank is a couple of EUR, bitcoin payment are the equivalent of a fraction of cents).
- No charge back. SEPA transfers, money hand exchanges, and bitcoin transfers: when it's done, it's done.
- No payment or account freezing. (All the complains against paypal are gone !)
In addition bitcoin goes a bit further:
- As mentionned above: bit faster, cheaper, than SEPA and you can even be your own bank account.
- bitcoin aren't geographically restricted (SEPA is Europe only. Bitcoins are internet-wide and even a bit more).
- bitcoin aren't fixed to a specific currency like EUR (you could have obtain your bitcoin using CHF, and the merchant you're buying goods from could be converting them to USD).
- a bank account could still be seized by government or law enforcement, whereas, depending on how you setup your stuff, you can be 100% in charge of your account. (possibility for 0% risk of seizing/freezing). That's negligible in the (somewhat) stable environment where SEPA is used, but that a very useful property for people living in unstable regions.
- possible implementation of security at the payment procotol-level. using 2-out-of-3 signature scheme you can implement trusted escrow-like system, except that the escrow CAN'T run away with the money by design.
(The security model is rather different than charge-backs, where the credit-card company or paypal function as jury/judge/executionner at the same time. The model is that in case of dispute, a trusted 3rd party can be asked to arbitrate how should get the money. That trusted party by design has nothing to do with the payment processor or wallet used by the merchant and client, and is agreed upon before hand. With credit cards, the merchant just has to accept that charge-back will happen).
bitcoin has some peculiar quircks:
- banking is about trust (your bank should be trusty) and secrecy (some countries like Switzerland are very paranoid about banking secrecy).
- bitcoin is about handling payment between untrusted partners, and the security comes by the fact that anybody can check the transaction, meaning that absolutely everything is broadcast to everyone else for verification purpose. Bye-bye secrecy and privacy, only pseudonymity is possible. (you can follow all transaction by account numbers, but you won't necessarily be able to stick an exact identity to each number).
"Sufficiently advanced satire is indistinguishable from reality." - [Tips: 1DrYakQDKCQ6y52z6QbnkxHXAocMZJE61o ]
From TFA
"Bitcoin is the first Internetwide payment system where transactions either happen with no fees or very low fees (down to fractions of pennies)."
There may not be large third party fees but that does not mean the transactions are low cost. There are opportunity costs, exchange rate costs, liquidity costs, accounting costs, and more. I keep seeing people fixate on transaction costs as if those are the only costs in play. They are not. Any sane merchant is going to charge for the added cost of handling bitcoins. Even if you can eliminate any middle men from the transaction (unlikely with any meaningful transaction volume), you have plenty of costs to account for.
Since bitcoin is not widely accepted, setting up the transaction is ordinarily going to be more time consuming (thus more expensive) and unless you think your time is worth nothing you incur significant opportunity costs. If you employ an accountant like most businesses do these costs are easily quantifiable. Bitcoin is very volatile and any use of it assumes very significant exchange rate risk. This may reduce in time but it cannot go away entirely. If you use a middle man to facilitate the transaction so that you minimize exchange rate risk, congratulations you have just introduced transaction fees to the party and thus eliminated any point in using bitcoin. The currently transaction fees for bitcoin are low because they have to be, not because of any inherent cost advantage. Literally every other cost related to bitcoin is higher than for a widely accepted fiat currency like dollars.
there are no chargebacks – this is the part that is literally like cash – if you have the money or the asset, you can pay with it; if you don’t, you can’t. This is brand new. This has never existed in digital form before.
There are plenty of ways to exchange money digitally with no possibility of a charge back. Good luck doing a charge back on a wire transfer. Furthermore charge backs exist because of inevitable disputes between buyers and sellers, not to enable buyers to screw sellers. Sometimes buyers misrepresent (both intentionally and unintentionally) what they are selling. Sometimes there is genuine disagreement about the terms of the sale. Sellers may hate them but the exist for a very good reason. Charge backs have a cost but it is not a cost without value. There are plenty of transactions that simply will not take place if the buyer has no independent recourse in the event of a dispute.
people can trade with Bitcoin (anywhere, everywhere, with no fraud and no or very low fees)
The notion that fraud can be eliminated is absurd on the face of it. Bitcoin in no way, shape or form will eliminate transaction fraud. At best it might shift around how it occurs a little. The previous argument (bitcoin is like digital cash) directly contradicts this argument. The lack of charge backs merely changes the type of fraud that can occur giving more advantage to sellers over buyers.
And of course people cannot trade bitcoin "anywhere" because it only works if there is a computer involved on both sides of the transaction. That eliminates a HUGE portion of the global population and most transactions that currently are conducted with cash.